A Tampa Bay Business Journal review of proxy filings from the Bay area's largest public companies shows that CEO compensation increased last year at 16, or 69 percent, of the 23 companies that trade on major stock exchanges and had filed proxies with the Securities and Exchange Commission by April 18.

While nearly every company said compensation packages are designed to align executive and shareholder interests, 10 CEOs got raises although their companies' stock prices dropped during fiscal 2007, the analysis shows.

Companies in general are slowing their annual compensation, primarily by dropping bonuses, said Paul Hodgson, senior research associate at the research group the Corporate Library.

But long-term compensation, including stock awards, are not going down as much because the equity that's vesting now was awarded two, three or four years ago.

"Despite the drop in the stock market, it still has value," Hodgson said. "That's why CEOs earn big compensation packages when the stock price has dropped during the year."

Linking pay to strategy

Rewarding executives despite poor performance is expected to decline in future years because of several trends, said Richard Dobkin, retired managing partner of the Tampa office of Ernst & Young. New SEC disclosure requirements mean that companies have to explain in greater detail how they make their decisions about executive compensation, Dobkin said.

For instance, Jabil Circuit Inc. (NYSE: JBL) in St. Petersburg provided shareholders an 11-page compensation discussion and analysis in its most recent proxy, compared to five pages in the prior year.

The most recent proxy specifically identifies the 22 companies Jabil looked at in benchmarking executive compensation, information not included in the prior proxy. It also includes a lengthy discussion of the principals and objectives of executive compensation, the process the board's compensation committee follows and a breakdown of perquisites, none of which is in the prior proxy.

Independent compensation committees are more frequently using outside advisers, said Dobkin, who serves on the compensation committee of CBRL Group Inc. (Nasdaq: CBRL), the Lebanon, Tenn.-based firm that operates the Cracker Barrel chain of restaurants.

"Another trend is a lot more activity by shareholder interest groups in raising questions and putting pressure on boards and compensation committees to make sure compensation is fair but not excessive," Dobkin said.

Boards of directors also are focused in the last few years on the objectives of compensation, stepping back and asking how the compensation strategy furthers company strategy, said Olga Pina, a shareholder at Fowler White Boggs Banker in Tampa and an attorney in the business transactions and corporate law practice.

That's what's happening at CenterState Banks of Florida Inc. (Nasdaq: CSFL) in Winter Haven, where top executives, including CEO Ernest Pinner, executed the strategy of growing the bank's business and adding branches, according to the proxy filing.

Pinner's pay went up 5.7 percent to $752,674, although the banks' stock price dropped 42.6 percent.

"There's no question that there should be a correlation between compensation and the stock price," Pinner said.

CenterState's board this year revised its compensation plan, putting in place incentives tied to return on assets and growth goals.

Shareholders' voice

Dozens of companies are facing "say on pay" resolutions from shareholders who want to be able to ratify executive compensation at annual meetings. There are at least twice as many "say on pay" resolutions this year as in 2007, Hodgson said.

Last year, shareholders approved "say on pay" at Verizon Communications Inc. (NYSE: VZ) and Aflac Inc. (NYSE: AFL). Both companies will begin the new policy in 2009.

Among the companies with resolutions before their shareholders this year are Progress Energy (NYSE: PGN), the Raleigh, N.C.-based parent company of Progress Energy Florida; Bank of America (NYSE: BAC) of Charlotte, N.C., the biggest bank in the Tampa Bay area; and The South Financial Group (Nasdaq: TSFG), the Greenville, S.C.-based parent company of Mercantile Bank.

Less tolerance from shareholders

Severance packages pushed up pay for two former CEOs -- Erik Vonk of Gevity (Nasdaq: GVHR) in Bradenton and John Long of First Advantage Corp. (Nasdaq: FADV) in St. Petersburg, both of whom unexpectedly left their companies during 2007.

Long's 2007 compensation was $5.7 million, including a $2.2 million severance payment, while Vonk's $1.5 million severance payment boosted his 2007 compensation to nearly $2.6 million. Severance agreements are coming under more scrutiny as disclosure requirements increase, said Olga Pina, a shareholder at Fowler White Boggs Banker in Tampa.

"In some packages, there's a visceral reaction from shareholders -- he's getting how many millions?" Pina said. "Although institutional investors are sophisticated enough to know that you need a good severance package to attract (a CEO) to one company versus another."

There's been a slow decline in salary and bonus multiples in severance agreements, said Paul Hodgson, senior research associate at the research group the Corporate Library. There are fewer arrangements that provide a departing CEO three times his or her salary and bonus, and more that are two times salary and bonus, Hodgson said. John Morris, who retired as CEO of Odyssey Marine Exploration Inc. (Nasdaq: OMEX) in Tampa on Jan. 2, received a cash separation payment of $325,000, the same amount as his salary in 2007. But under a consulting arrangement that will continue for three years, he will receive $975,000 for Odyssey deals in which he played a role.

mmmanning@bizjournals.com | 813.342.2473

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